US Regulators Balk at Billion-Dollar Takeover of Ports America

Two U.S. Federal Maritime commissioners concerned about foreign ownership of American supply chains want federal officials to conduct a "full and thorough review" of the proposed purchase of Ports America by a Canadian pension fund.

In a letter sent last week to U.S. Treasury Secretary Janet Yellen, FMC Commissioners Carl Bentzel and Louis Sola warned that the proposed acquisition by the Canada Pension Plan Investment Board (CPP Investments) could run counter to U.S. economic interests.

"CPP Investments is governed and managed independently of the Canada Pension Plan and at arm's length from governments," the commissioners wrote.

"Nevertheless, as a foreign enterprise with a vested interest in the welfare of foreign nationals, a review is warranted. We grant you that the foreign interest involved comes from our trusted northern neighbor and close trading partner, still, its ultimate loyalty does not lie with the United States."

The acquisition, valued at $4 billion, was announced in late September after CPP Investments agreed to acquire Oaktree Capital Management's stake in Ports America, the country's largest port operator with terminals at 33 U.S. ports. Those ports include Los Angeles; New York-New Jersey; Savannah, Georgia; and Houston. CPP Investments has been a minority shareholder since 2014.

Bentzel and Sola contend in their letter that a review of the acquisition, which would be conducted by Treasury's Committee on Foreign Investment in the United States (CFIUS), would not be without precedent.

They pointed out that in 2006 CFIUS reviewed the acquisition of the North American operations of P&O Ports by Dubai-based DP World. A vote by the U.S. Congress to block the purchase led to the creation of Ports America, they noted.

"After an examination it may be determined that the reported acquisition is appropriate, however, to allow acquisition of such a significant portion of our national supply chain without review would be a dereliction of duty," the letter stated. 

The commissioners told Yellen they are also concerned about potential cargo diversions related to Canadian Pacific Railroad's acquisition of Kansas City Southern Railroad, which is under review at the Surface Transportation Board. They explained that because the federal government in the U.S. is not allowed to favor any particular ports, underinvestment at some ports leave them more vulnerable to foreign competition.

"As a result, we have seen substantial deviation of cargo bound for the U.S. markets being transported through Canadian ports. We question whether the efforts of the Canadian Pacific Railroad to purchase the Kansas City Southern are intended to increase cargo diversion, and we question whether CPP Investments is in fact committed to growth of U.S.-based maritime infrastructure.

"This proposed acquisition is an all too familiar repetition of a U.S. transportation and supply chain asset being acquired by foreign investors," they stated. "Our supply chain assets directly impact our domestic economy and our national security. They should not be treated as an ordinary resource to be sold to whomever can pay the highest price."

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• US regulator probing China's role in container shortage
• Regulators warn container lines to stop refusing US exports

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